The U.S. Department of Justice (DOJ) is backing consumers fighting to revive a class-action lawsuit that accuses the major Las Vegas hotel chains of sharing data with each other via algorithms that keep room rates artificially inflated.
This marks a rare ray of hope for the lawsuit, which was dismissed in May, handing Caesars Entertainment, MGM Resorts, Wynn Resorts, and Treasure Island an initial win. (A similar lawsuit was dismissed earlier this month in Atlantic City.)
To date, federal courts have ruled against plaintiffs’ claims that the definition of price-fixing is achieved when competing resorts share real-time occupancy data with a software platform that then recommends room rates back to the hotels.
But this new hope reawakens the possibility of significant changes to the way Las Vegas casino resorts conduct their business. Federal antitrust laws, specifically the Sherman Act, prohibit companies from conspiring to monopolize or attempting to monopolize a market for products and/or services like hotel rooms.
What the DOJ Said
Justice Department attorneys wrote — in an amicus brief filed Thursday with the 9th US Circuit Court of Appeals — that the shared use of algorithms by competitors to guide pricing decisions fan facilitate collusion and creates “new dangers” for consumers.
According to the DOJ brief, US District Chief Judge Miranda Du made legal errors in rejecting the original suit that should not be upheld. (Judge Du noted that the lawsuit failed to clearly show any agreement to conspire among the resort operators, and that the software generated pricing recommendations that hotels were not obligated to follow.)
The DOJ wrote that upholding Du’s ruling “could stymie meritorious antitrust claims involving pricing algorithms.”
The DOJ is not part of the lawsuit but occasionally weighs in on cases that it thinks are in the public interest.
The price-fixing lawsuit was filed in January 2023 by Seattle-based law firm Hagens Berman Sobol Shapiro. It alleges that the four biggest Las Vegas casino companies used Cendyn software to collude to artificially inflate the rates of their hotel rooms in violation of the Sherman Antitrust Act.
Cendyn’s “Rainmaker” software continuously accesses a partnered casino hotel’s occupancy data and certain nonpublic proprietary data. The software then “processes and analyzes” the data inputs for that individual hotel. The service then uses an algorithm with “other supply and demand data” from competing hotels to recommend an “optimal” rate for the casino hotel’s rooms.
The casino may adopt or reject Rainmaker’s recommended rate. The complaints argue that casinos adopt the software’s recommended rate about 90% of the time.
The hotel groups and Cendyn all deny any wrongdoing.
The appeal is currently ongoing. Once the 9th Circuit reviews submissions from both sides, a three-judge panel will hear oral arguments. A decision is expected sometime next year.
Plaintiffs in the Atlantic City case are expected to appeal that decision as well.
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